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UAE-Korea Trade: Pioneering new frontiers in global commerce

A new KITA report reveals the UAE’s competitive advantages in value-added trade, showcasing a unique economic structure that highlights retail and air transport sectors, distinct from its GCC neighbours

Published: Thu 26 Sep 2024, 4:56 PM

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The Korea International Trade Association (KITA) UAE Centre released a report titled “Analysis of the UAE’s Economic Structure and Its Relationships with South Korea” on September 25.

The report applied a value-added approach to trade analysis, addressing the issue of double counting in traditional trade statistics, where products crossing borders multiple times are counted repeatedly. Additionally, it applied the Value-Added Revealed Comparative Advantage (VRCA) methodology to assess the UAE’s export competitiveness.

By focusing on value-added data, the report provides a clearer view of each country’s actual trade contributions, with a particular emphasis on the UAE- Korea trade relationship. The VRCA analysis further highlights sectors where the UAE holds a competitive advantage in international trade.

UAE’s Economic Structure: Active Trade in the Private Sector

The report highlights that the UAE‘s economic structure is distinguished by active value-added trade in the private sector, particularly when compared to other GCC nations like Kuwait and Saudi Arabia.

All three GCC nations — UAE($72.3B), Kuwait($60B), and Saudi Arabia ($237.2B) — contribute the largest share of their value-added exports through the mining sector. However, while Kuwait ($14.3B) and Saudi Arabia ($78.5B) have the second-largest value-added exports in public administration and defence indus- tries, the UAE ($10.8B) stands out with retail as its second-highest contributor, highlighting a key difference between the UAE and other GCC nations.

Engaging in value-added trade across diverse industries

The report underscores the value-added trade between the UAE and Korea spans a wider range of industries compared to other GCC nations.

Korea imports a significant amount of value-added from the Middle East’s mining sector, with around $9 billion from Saudi Arabia and $1.2 billion each from

the UAE and Kuwait. However, unlike Kuwait and Saudi Arabia, where the mining sectors constitute over 80 per cent of value-added imports, the UAE’s value- added exports to Korea from the min- ing sectors are below 50 per cent, which aligns closely with the global average for the UAE.

Korea exports the largest share of value-added exports in construction to the GCC nations, with particularly high shares for the UAE (28.4 per cent), Kuwait (38.5 per cent), and Saudi Arabia (22.2 per cent). In all three nations, the public administration and defence sec- tors also rank among the leading sectors for value-added exports.

UAE’s global competitiveness in mining and air transport

The UAE, Kuwait, and Saudi Arabia all demonstrate strong comparative advan- tages in the mining sector, with Kuwait leading at a VRCA of 12.7, followed by Saudi Arabia at 8.3, and the UAE at 7.0.

Despite these strong figures in mining, each of these nations has fewer than ten industries where the VRCA exceeds 1. The UAE, however, stands out with a notable competitive advantage in the air transport sector, with a VRCA of 6.9, close to its figure for mining.

Phil-jae Park, president of KITA UAE Centre, said he plans to expand the same type of research to major Middle East and North Africa countries in the near future.



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